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Ask HN: How much is too much?

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Re: Ask HN: How much is too much?

#11

Post by cabalamat »

mbyrne wrote: post #5

The quick answer if that if you are going to sell 1/3 of your company for two months of ramen noodles then you don't really think much of it. Already I can tell this guy is not an angel, he smells blood. Plus he's running his company full-time but wants to be a one third partner? When? on weekends? You said you would give numbers but then don't. How much money do you need to survive two months? or is it not two month…

> it is super obvious you are not comfortable with this guy and don't trust him

If you don't trust someone, then regardless of how the numbers add up, it's almost certainly a bad idea to have him as a business partner.

Re: Ask HN: How much is too much?

#12

Post by seaking »

mbyrne wrote: post #5

The quick answer if that if you are going to sell 1/3 of your company for two months of ramen noodles then you don't really think much of it. Already I can tell this guy is not an angel, he smells blood. Plus he's running his company full-time but wants to be a one third partner? When? on weekends? You said you would give numbers but then don't. How much money do you need to survive two months? or is it not two month…

Ah yes. My apologies.

Our current burn rate is about $20k a month, which includes modest founder salaries (not quite enough to pay the bills, but it helps).

Most of our burn is actually for third-party data providers, which are essential to our business at this time.

We do think we're close to revenue, but it may be a few months longer before we're actually cashflow positive.

I'll be honest -- there's a divorce between our heads and our guts at this time. From a business perspective, it makes sense to keep the lights on and see where this thing goes. If we walk away from this deal, we put the company in serious jeopardy unless we can find an accelerated path to revenue. So the head says yes, but the gut says no.

Re: Ask HN: How much is too much?

#13

Post by timelinex »

seaking wrote: post #12
mbyrne wrote: post #5

The quick answer if that if you are going to sell 1/3 of your company for two months of ramen noodles then you don't really think much of it. Already I can tell this guy is not an angel, he smells blood. Plus he's running his company full-time but wants to be a one third partner? When? on weekends? You said you would give numbers but then don't. How much money do you need to survive two months? or is it not two month…

Ah yes. My apologies. Our current burn rate is about $20k a month, which includes modest founder salaries (not quite enough to pay the bills, but it helps). Most of our burn is actually for third-party data providers, which are essential to our business at this time. We do think we're close to revenue, but it may be a few months longer before we're actually cashflow positive. I'll be honest -- there's a divorce betwe…

[off topic]This raises an interesting question, whether gut and head should agree when conducting business?

Re: Ask HN: How much is too much?

#14

Post by MarinaMartin »

Don't give away half of your company for two months of work. Pick up some consulting work pronto. Sell your car. Try to get up-front payments from future clients.

Anecdotal stories of people securing funding in one day over lunch are true, but not the norm. Usually fundraising is a six month full-time process. If you're on the precipice right now and truly feel (and I think you have to truly feel it!) that revenue is right around the corner, then stick to that path for at least a couple of months. You can always get jobs and pursue funding at that point.

Re: Ask HN: How much is too much?

#15

Post by seaking »

patrickgzill wrote: post #6

What exactly does he define "vicariously living the startup life" as ? It seems that the answer to this might give you a lot more insight.

Yea, we've been wondering that ourselves. :)

We've already gone through the DD process with him and his lawyer, and a new shareholder's agreement has been drafted. It has verbiage in it that basically allows him to come on as a voting shareholder, with the ability to ascend to a director once he feels "he is ready".

His readiness is mostly contingent on industry knowledge. We're in a space that is largely unknown to him, and he wants to take the time to bring himself up to speed before taking a more active role in the company.

One of the reasons we're feeling trepidatious is that we haven't spoken to the man since August, save two email. The rest of our interactions have been with his lawyer, who, while civil, has been a bit onerous to work with.

We're just not sure if this is an indication of how our relationship will work going forward, or if this is merely a difficult courtship period that could result in a truly beneficial working relationship down the road.

Re: Ask HN: How much is too much?

#16

Post by timelinex »

aaronblohowiak wrote: post #10

50% of zero is less than 30% of something. If you go under, your valuation will be 0!

This doesn't say anything about whether to take this guy's money. They can still get money from banks, friends, other angel's or get this guy to reduce his terms. Right now, this guy wants to know what are his options.

Re: Ask HN: How much is too much?

#17

Post by lionhearted »

mbyrne wrote: post #5

The quick answer if that if you are going to sell 1/3 of your company for two months of ramen noodles then you don't really think much of it. Already I can tell this guy is not an angel, he smells blood. Plus he's running his company full-time but wants to be a one third partner? When? on weekends? You said you would give numbers but then don't. How much money do you need to survive two months? or is it not two month…

> Anyway, it is super obvious you are not comfortable with this guy and don't trust him, but you are thinking of making him an equal partner? Big Mistake.

I more or less agree and voted you up, but if the guy's asking for 1/3rd of the company at $750k, does that mean he's putting in $250k cash? That might be the lesser of two evils here. Can't really say without more detail, but sometimes you've got to bite the bullet and choose between a few different bad courses of action.

What I'm curious about is if the company has made any revenue yet. Your first revenue is always further away, and smaller, than your projections.

Edit: I just read the part below about not hearing from him since August... probably not someone you'd want directly involved in your team or decisionmaking.

Re: Ask HN: How much is too much?

#18

Post by Xipe »

cabalamat wrote: post #11
mbyrne wrote: post #5

The quick answer if that if you are going to sell 1/3 of your company for two months of ramen noodles then you don't really think much of it. Already I can tell this guy is not an angel, he smells blood. Plus he's running his company full-time but wants to be a one third partner? When? on weekends? You said you would give numbers but then don't. How much money do you need to survive two months? or is it not two month…

> it is super obvious you are not comfortable with this guy and don't trust him If you don't trust someone, then regardless of how the numbers add up, it's almost certainly a bad idea to have him as a business partner.

"it is super obvious" what you are restating.

Re: Ask HN: How much is too much?

#19

Post by seaking »

lionhearted wrote: post #17
mbyrne wrote: post #5

The quick answer if that if you are going to sell 1/3 of your company for two months of ramen noodles then you don't really think much of it. Already I can tell this guy is not an angel, he smells blood. Plus he's running his company full-time but wants to be a one third partner? When? on weekends? You said you would give numbers but then don't. How much money do you need to survive two months? or is it not two month…

> Anyway, it is super obvious you are not comfortable with this guy and don't trust him, but you are thinking of making him an equal partner? Big Mistake. I more or less agree and voted you up, but if the guy's asking for 1/3rd of the company at $750k, does that mean he's putting in $250k cash? That might be the lesser of two evils here. Can't really say without more detail, but sometimes you've got to bite the bulle…

No revenue yet. Our first campaign launched yesterday, and one of our sites is seeing the first hits trickle in now.

Re: Ask HN: How much is too much?

#20

Post by lancewiggs »

seaking wrote: post #15
patrickgzill wrote: post #6

What exactly does he define "vicariously living the startup life" as ? It seems that the answer to this might give you a lot more insight.

Yea, we've been wondering that ourselves. :) We've already gone through the DD process with him and his lawyer, and a new shareholder's agreement has been drafted. It has verbiage in it that basically allows him to come on as a voting shareholder, with the ability to ascend to a director once he feels "he is ready". His readiness is mostly contingent on industry knowledge. We're in a space that is largely unknown to…

It sounds like you already know the answer.

My 2 cents is to back yourselves for another month or two, keeping it lean. Use the time to improve the viability of the business, but also to shop for other offers. A bit of competition will increase that valuation and let you assess the quality of advice and commitment you'll get.

Alternatively sell him 15% of the company at the valuation he is offering now, and use that money to keep going until the next round at a higher valuation based on more mature business results.

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